On 21 October 2014, the Council of Ministers considered a draft amendment (version as of 17 October 2014) to the Polish Gambling Act dated 19 November 2009 which envisages a new opportunity for foreign gambling operators to obtain a permit or a license for conducting gambling activities in Poland.
The draft has already been notified to the European Commission. According to the amendment, which is due to come into force on 1 June 2015 (with a possible delay until 1 January 2016), this opportunity will be available to joint-stock companies (spółka akcyjna), limited liability companies (spółka z ograniczoną odpowiedzialnością), or companies established on the principles appropriate for the said companies, which have their registered office in a Member State of the European Union (EU) or a Member State of the European Free Trade Association (EFTA) that belongs to the European Economic Area (EEA), if they establish a branch in Poland (hereinafter referred to as European companies).
Moreover, in order to apply for a Polish license or permit, these European limited liability or joint-stock companies will have to adapt themselves to the requirements of Polish law, e.g. they will have to have the minimum level of share capital required by the Polish Gambling Act, regardless of the requirements applicable in the country in which they have their registered office. On one hand, as far as the Polish Commercial Companies Code is concerned, the legislator comes to the conclusion that share capital does not constitute material security for a company’s creditors because it does not guarantee that the company retains assets of the same value, and thus suggests amending the Commercial Companies Code by introducing a new type of capital company which does not have any share capital. However, on the other hand, the legislator underlines the protective role of share capital and introduces a relatively high entry-threshold on the day of filing an application for a license or permit.
The remaining provisions concerning Polish companies conducting gambling activity should be applied accordingly. According to established case-law, “accordingly” means directly, with modifications, or not at all. However, the substantiation of the draft amendment suggests that on this point the legislator had in mind the direct application of the provisions concerning Polish companies to foreign companies. Only the legislator knows why such a vague word as “accordingly” was used. The following regulations should be applied “accordingly” to European companies:
- any change in the structure of the share capital of a company operating games organised in gaming centres or betting will require the permission of the minister in charge of the public finance;
- any change in the composition of the management board or supervisory board of a company operating games in gaming centres or betting will require the permission of the minister in charge of the public finance;
- any other change will have to be notified to the authority which granted the license or permit within seven days of the registration of these changes by submitting documents evidencing the changes;
- only legal entities or companies without legal personality which have their registered office in an EU Member State or an EFTA Member State that belongs to the EEA will be able to acquire or subscribe for shares in the companies (this may be a problem for listed companies);
- European companies may apply for a licence or a permit if they are able to demonstrate: 1) the lawfulness of their sources of funding; 2) the due payment of taxes and other customs duties; and 3) the due payment of social and health insurance contributions.
With respect to operating on the Internet, no material changes are expected. European companies will only be able to conduct betting activities in Poland under the conditions set out in the Polish permit, in the approved betting rules, and in the Polish Gambling Act. An example of the obligations connected with such online activity are as follows:
- devices processing and storing information and data relating to betting and its participants have to be installed and stored in the territory of an EU Member State or an EFTA Member State;
- only a website whose national top-level domain is assigned to Polish websites may be used for the purpose of organising betting;
- it is obligatory to archive, on a real-time basis, on a device designed for the purpose of data archiving located in Poland, all data exchanged between an entity and a betting participant, including data allowing the course and the result of the betting and the transactions arising from the betting to be established, and the data allowing a betting participant to be identified;
- customs officers should be provided with access to data stored on the storage devices and provided with the appropriate tools and software to ensure data security;
- all transactions arising from the betting should be made exclusively through a bank account kept at: 1) a national bank; 2) a branch of a foreign bank; 3) a credit institution pursuing its activities as prescribed in Article 48i of the Banking Law; or 4) any other institution authorized to keep payment accounts in accordance with the Act on Payment Services of 19 August 2011.
What does the obligation to set up a branch in Poland mean in practice? First of all, it means that a permanent establishment for tax purposes will be created in Poland, and thus European companies which obtain a license or a permit will have to register in Poland for tax purposes and settle taxes arising from their business activity conducted in Poland. As they will operate through a branch, they will be obliged to fulfil a range of other relevant requirements, in particular:
- appoint a person in the branch who is authorised to represent the foreign company;
- use the original name of the foreign company in the name of the branch office, together with the legal form of the foreign company translated into Polish language and the words “branch office in Poland” in Polish language (“oddział w Polsce”);
- keep separate accounting books for the branch in Polish language, in accordance with the regulations of the Act on Accounting;
- submit the branch’s annual financial statements to the National Court Register and the appropriate tax office;
- notify the competent minister in charge of economy of any changes of the factual and legal circumstances, in particular winding-up proceedings involving the foreign entrepreneur or its loss of the right to pursue economic activity, 14 days after those circumstances have occurred.
In addition, an indirect and far-reaching effect of the proposed amendment will be the difficulty to continue providing services in Poland on the basis of the freedom to provide services principle, which allows entities to operate temporarily without the obligation to register. Under EU law, the freedom of establishment principle takes precedence over the freedom to provide services principle; therefore, from the moment a European company can fully benefit from the possibility to conduct activity in Poland through a branch on the basis of the freedom of establishment principle, the real challenge will become justifying its temporary operations in Poland, which is a necessary condition for still relying on the freedom to provide services principle.
The English version of the draft can be found at the following link: http://ec.europa.eu/enterprise/tris/en/search/?trisaction=search.detail&year=2014&num=537